Chapter 19, Problem 1CQQ

To determine

Example of human capital.

Answer to Problem 1CQQ

Option ‘b’ is the correct answer.

Explanation of Solution

Option (b)

Education is an important human capital because it represents an expenditure of resources at one time to raise productivity in the future. Since studying latest developments in computer programming enhanced his productivity that enabled him to attain higher income in future, it is considered A human capital. Thus, option ‘b’ is correct.

Option (a)

Compensating differential is the difference in wages that arise to offset the nonmonetary characteristics of different jobs. So option ‘a’ is incorrect.

Option (c)

Under signaling, the choice of being a math teacher is better than spending time for studying. Hence option ‘c’ is incorrect.

Option (d)

There is no mention about receiving above the equilibrium level wages; option ‘d’ is incorrect.

Economics Concept Introduction

Concept Introduction:

Human capital: It is the accumulations of investments in people in the form of education, on-the-job training, etc.

Compensating differential: It is the difference in wages that arise to offset the nonmonetary characteristics of different jobs.

Efficiency wages: It is the above-equilibrium wages paid by firms to increase worker productivity.